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Improving the Enabling Environment for for Long Term Finance in Mozambique

Program Development Objective (PDO)

The program’s objectives are to strengthen the capacity to regulate, supervise, and improve the enabling environment in the pension and insurance sectors as social safety net providers in Mozambique. Strengthening these sectors will contribute to increasing the supply of domestic long-term funding. The program also aims to help authorities develop a local bond market by implementing measures to increase transparency and liquidity for government and nongovernment bond markets, introducing new financial instruments, and expanding the investor base. Developing bond markets will, in turn, provide these sectors with more investment opportunities for diversification.

Background

The government recognizes the importance of the financial sector for development, which will help reduce poverty and improve the business environment. Toward that end, the Mozambique Financial Sector Development Strategy 2013–2022, which was developed with the assistance of funding from the FIRST Initiative, was adopted to provide a vision and a comprehensive and detailed roadmap for reforms in the financial sector. The strategy specifically sets a goal to develop long-term financial markets in Mozambique. This can be achieved by (a) developing the government bond primary and secondary markets and (b) increasing the supply of private capital to support private sector development through improvements to the mobilization and investment of long-term funds, of which pensions funds and insurance companies can be an important source.

Fixed-income investment vehicles
1. Drafting second generation of government bond market reforms (building on the current FIRST
Initiative program)
2. Expanding the nongovernment bond market
3. Expanding the investor base for government and nongovernment bonds
4. Improving price dissemination and secondary markets of government and nongovernment
bonds